Brussels dithered for years over how to respond to complaints from farmers that they have almost no bargaining power against titans such as Britain's Tesco and France's Carrefour. The farmers' key demand is that the EU should roll out legislation to end so-called unfair trading practices, such as late payments by supermarkets and abusive contracts.

Until now, the Commission tried to present itself as a neutral broker in these bitter, complex feuds over the food supply chain.

That all changed Friday, when European Commissioner for Agriculture Phil Hogan launched an unexpected attack on supermarkets in a speech at Dublin Castle and announced he would aim to draft legislation to protect farmers from hypermarket kingpins. Hogan was categorical about who was to blame.

"Concretely, supermarkets in particular now enjoy 'super power' due to the twin effect of increased globalization and a high level of concentration within Europe," he said. "This gives them disproportionate leverage over primary producers.

“The imbalance of bargaining power between price setters and price takers is stark, leading to a situation where there is a real ‘fear factor’ for farmers of commercial retaliation, late payments and other headaches,” he told his audience in Dublin.

“This is a narrative which has been built up by the farming community — that all their problems can be blamed on retailers” — Neil McMillan, director at EuroCommerce

Hogan’s aides later tweeted an image of a farmer in green dungarees struggling under the weight of a food processing plant and a supermarket. The commissioner's hard-line speech against food retailers triggered a flurry of phone calls and emergency meetings of supermarket lobbyists in Brussels concerned about an assault on what they argue should remain a free market.

Purveyors or profiteers?

Hogan's legislative proposal is expected early next year and will include new rules aimed at improving price transparency in the market and increasing the power of agricultural cooperatives so that farmers face fewer problems with late payments, poorly negotiated contracts or limited bargaining power, people familiar with the plan say.

Hogan insists it is time to give farmers a “fair share of the pie" | Julien Warnand/EPA

Another idea that Brussels considered after it received recommendations from an independent group of experts last year would oblige countries to set up so-called groceries' adjudicators that could fine supermarkets should they treat farmers unfairly. The U.K. has already activated such an initiative, and in 2015 found evidence that Tesco failed to pay farmers for their goods for more than a year after disagreements over the amount they owed.

Supermarket chains like Lidl and Carrefour, however, say they are being unfairly targeted. They actually buy very little directly from farmers and instead deal with large processors such as Arla, Nestlé and Danone. Many of the retailers insist the bumper margins are made in the processing businesses, not by supermarkets.

“This is a narrative which has been built up by the farming community — that all their problems can be blamed on retailers,” said Neil McMillan, director at EuroCommerce, an industry lobby representing supermarket groups such as Carrefour, Tesco and Lidl.

McMillan said 95 percent of what supermarkets buy comes from processors, not farmers. He also noted that net margins among supermarket chains were between 1 percent and 3 percent due to extensive spending on wages, transportation and refrigeration.

Paying farmers better prices requires agricultural workers to “add value” by supplying local markets and consumers with what they want, he added. For example, he said, farmers in France were not satisfying high domestic demand for organic pork and beef, leaving supermarkets no option but to import from Germany.

Securing a legacy

The stakes for Hogan are high. The Irish commissioner knows he will be hard pressed to see through a serious reform of the Common Agricultural Policy — the bedrock of European farm policy that represents some 40 percent of the EU budget — before the end of the current Commission’s mandate in 2019.

The bottom line is that there is likely to be less money for farm subsidies available after Britain's departure from the bloc.

This means that his legacy among farmers could well depend on whether he can protect them from supermarkets. Legislation on unfair trading practices could help make up for that funding loss.

Pekka Pesonen, secretary-general of Copa & Cogeca, the lobby representing farmers in the EU, said there is widespread support among his members for tough action to rein in supermarkets.

“Suppliers big in number are very small in negotiating power and have been squeezed by the retailers," he said.

Last year, an independent Agricultural Markets Taskforce set up by the Commission concluded that the EU should “introduce a harmonized baseline of prohibited UTPs [unfair trading practices] in member states.” It recommended that no payment periods should take longer than 30 days. It also insisted that there should be no retroactive changes to contracts, no contributions to marketing costs, no claims for wasted products, no last-minute cancellations and no demands for upfront payments.

Hogan was unimpressed and insisted it is time to give farmers a “fair share of the pie.”

Any such policy proposal will not be implemented without a stern fight from supermarkets.

In August, EuroCommerce submitted its feedback on the issue of UTPs, insisting that regulation at EU level was not the right tool.

“We furthermore do not see added value of further EU level regulation as all member states have basic regulation covering contractual relationships," it said. "A significant majority have adopted complementary schemes to address alleged UTPs, including enforcement provisions.”

Hogan was unimpressed and insisted it is time to give farmers a "fair share of the pie."

Authors:

Related stories on these topics:

wow

German cars can be made cheaper elsewhere. French carrots can be bought cheaper elsewhere in the world.

Looking at my fruit/veg it’s current ‘country of origin’ labels they South Africa, Columbia and Tunisia.

No EU27.

Cheerio Now and Good Luck.

Posted on 10/10/17 | 6:04 AM CET

Jodocus5

A good idea to level the playing field a little. Farmers have it difficult enough without supermarkets abusing their market power.

On the other hand, having even more EU regulations is an expensive way of addressing the problem. Well, in this case I suppose we’ll have to.

If even the UK went before us in creating additional regulations, it’s probably safe to follow suit.

Posted on 10/10/17 | 8:58 AM CET

knokke

Jodocus, nice to be on the same wavelength on an issue as you! The danger of trying to rebalance is that some degree of extra (farm) protectionism will be added, rather than trying to encourage a shift in farmer mentality towards producing for market (responding to demand), UK farmers have been on this road for over a dozen years, Dutch farmers get it too, but in France, the set up of the sector prevents farmers from doing so.

As an aside, pass through, or what happens to prices from farm gate to shop, has been a big issue in US research and policy for a long time, yet has usually been ignored on the European continent, so congrats on slowly starting to catch up

Posted on 10/10/17 | 10:48 AM CET

Reconstruct

Great to see the EU campaigning for higher prices for consumers. So inspirational. I’d happily see my food bill go up by at least 20% if it furthers the Great European Dream.

Posted on 10/10/17 | 5:24 PM CET

Trust

Hi Simon Marks… Brussels is a city in Belgium! You ate, digested and now spread the linguistic propaganda of EU haters. I and others expect better from trustworthy journalists in 2017!!!

Posted on 10/10/17 | 5:30 PM CET

Falsehood

@Trust
Perhaps “the linguistic propaganda of EU haters” is actually just the boring old truth that you happen not to like. It can be confusing.

Posted on 10/10/17 | 9:02 PM CET

Tarquin

I worked for a large multi-national that sold much of its output to supermarkets. The latter would use any excuse to delay paying their bills, one small error meant no payment until that was fixed; they must be a nightmare for a small supplier.

That said, as the article mentions, most farmers sell to processors, not supermarkets.

Posted on 10/11/17 | 9:48 AM CET

Vishnou

Well, it is a war I look forward to and approve of. Small private shops where one could rely on advice, fresh, unaltered products, have almost all disappeared because it is easier to find “everything” one needs in soulless supermarkets, where one queues at the counter for ages after picking up what seems to be more or less eatable only to find the cashier doesn’t want to smile nor talk, throwing items at the buyer which that has to quickly grasp. Moreover, supermarkets and agri-companies exploit landfarm intensively to impose their own selection and outrageous Monopoly. Is this really progress?

Posted on 10/11/17 | 3:54 PM CET

Jodocus5

@Reconstruct

“Great to see the EU campaigning for higher prices for consumers. So inspirational. I’d happily see my food bill go up by at least 20% if it furthers the Great European Dream.”

I’m glad you approve. We could use more positive thinkers like yourself, especially in the UK.

If you like fair pricing, you’ll love the upcoming EU-approved diet-friendly lifestyle cookbook. Available soon in any (EU) language of choice and tailored to healthy, tasty, and value-for-money produce available from carefully selected shops in your neighborhood. Special attention paid to seasonal specialities!

Not only will it ease your daily menu-choice with Sunday-to-Sunday meal plans (see our online weekly menu planning app), it’s packed with tips on eating healthily and affordably! Special tips on making effective use of your kitchen. You will be guided through the use of your hob and basic kitchen utensils! Microwave-friendly recipies available too!

And don’t forget: its tips on ditching the crisps, junk food, and snacks will come as an eye opener (and a money-saver) for many!

Reserve your copy now and laugh when you find you can afford to pay farmers a fair price and fight your morbid obesity at the same time!

Posted on 10/11/17 | 9:41 PM CET

Albert Leo

If all you care about is cheap, that’s all you will get.

Posted on 10/12/17 | 6:39 AM CET

Greek

I think this is perfectly reasonable.
If farmers can make a living properly without being squeezed they don’t need extensive subsidies just perhaps insurance for bad weather.
Also there will be less distortion in this market. Hopefully less pesticides.

In the end of you want a healthy diet, you need to be buying the fresh stuff and nothing that is prepared in a factory.
I am very supportive of a market without subsidies but without bullies.

We need more supermarkets competing on quality.
I envision something with nutritionists advising what you shop. A bit like there are in clothes shops. But with expert education.

Posted on 10/12/17 | 7:26 AM CET

pexit

That’s the new way that have found the EC to cheat EU farmers and implement after future massive cut down in the CAP…

Posted on 10/12/17 | 9:57 AM CET

pexit

That’s the new way that have found the EC to cheat EU farmers and implement after future massive cut down in the CAP…

Posted on 10/12/17 | 10:00 AM CET

pexit

The divine moral comedy is once again put in action…That’s the new way that has found the EC to cheat EU farmers and implement after future massive cut down in the CAP…

Posted on 10/12/17 | 10:03 AM CET

Trust

@Falsehood
If you are “bored”, “confused” and can’t contribute anything of substance, I suggest you get a better job… you troll.

Posted on 10/13/17 | 1:40 PM CET

Jan Werner

The public should be Aware that Hogan is in the end targeting the end consumers. What he calls a “fair share of the pie” means that he wants to increase prices charged by farmers to their customers. Such higher prices will lead finally to an increase of prices to consumers. Retailers fight for competition in the market, which is at the core of the EU single market and which has led to a broad range of food products at reasonable prices to consumers. The recent increase in milk and butter prices show that markets react immediately to increased sales prices from farmers. It should be on the Agenda of the EU Commission to protect consumers from such one-sided and biased approach of the biggest lobbyists which the farmers have.

Posted on 10/13/17 | 4:21 PM CET

Roland

it’s not just farmers it’s everyone. Because of their size they can negotiate special/lower prices while smaller retailers cannot, that gives them huge price advantages.